CAMBRIDGE INTERNATIONAL AS & A LEVEL BUSINESS: TEACHER’S RESOURCE
Exam-style questions and sample answers have been written by the authors. In examinations, the way marks are awarded may
be different.
Coursebook answers
Most of the answers are in ‘outline’ form indicating the appropriate points and skills that learners need
to include in their answers. They provide the necessary guidance to allow learners to develop and extend
the points for a fuller answer that contains the relevant skills. In many instances, there may be other valid
approaches to answering the question.
Chapter 20
Business in context
Learners’ discussion might include:
Importance of digital promotion
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They wish to appear to be trendy and technologically advanced.
The target market is focused on younger consumers who are more likely to use social media.
Digital promotion can be cost-effective and much cheaper than traditional forms of advertising.
Personal communication
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Email can be used to confirm purchases and inform individuals about new products.
Text messages can be sent to subscribers.
Apps can be used to push messages to consumers’ smartphones.
Stop promotion and reduce prices?
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Reducing the price will reduce the profit margin and may result in price wars with competitors.
Demand may not be responsive to a reduction in price and, therefore, although sales might increase,
there would be no increase in revenue.
Promotion is expensive and not guaranteed to be successful.
Promotion is necessary to react to the promotion of other businesses.
Promotion helps keep a product in consumers’ minds.
Activities
Activity 20.1
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As businesses spend so much money on promotional campaigns, they need to know whether that
spending has had the desired effect in terms of impact on, among other things, branding and sales.
If no attempt is made to measure effectiveness, businesses may be wasting valuable resources on
campaigns that fail to achieve business objectives. With measurement of effectiveness, businesses can
learn from successful campaigns and improve the targeting of marketing.
The evidence suggests that focusing on one form of promotion is less effective than taking a multi-platform
approach. There may be diminishing returns from spending on a particular form of advertising, i.e. the
benefit from each extra dollar spent decreases and may even become negative. Consumers may tire of seeing
the same advertising message constantly and there may come a point where more advertising is detrimental.
Businesses such as Sony and Samsung have such large advertising budgets that the money is best spent
across a range of different promotional platforms. This may enable greater coverage of the target market.
Cambridge International AS & A Level Business – Stimpson & Farquharson © Cambridge University Press 2021
CAMBRIDGE INTERNATIONAL AS & A LEVEL BUSINESS: TEACHER’S RESOURCE
Evaluation could include a consideration of the need for detailed market research on the companies’
consumers and on the influence that different forms of promotion have on their buying decisions.
Market research is often at the root of most marketing decisions.
Activity 20.2
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(855 − 623) ÷ 623 = 37.2%
Digital forms of advertising are cheaper than traditional advertising on television and in national
newspapers. TV adverts can cost (in 2020) $8m to film and $0.4m to show for 30 seconds on major
TV channels. A start-up adventure holiday firm lacks the finances to pay for this approach. Digital
advertising is targeted and cheap. For example, pay-per-click marketing on a business website costs (in
2020) around $10 000 and search engine optimisation can be bought for a further $10 000.
Learners’ answers might include:
• Size of the marketing budget. The larger the budget, the greater the range of promotional options.
A significant budget will be required for national television advertising.
• Target market. If the target market is younger people, digital promotion through Instagram may
be appropriate, whereas an older target market may require more traditional forms of advertising.
• Type of message that needs to be communicated. For example, if detailed information must be
communicated, written forms of communication will be more effective (e.g. in newspaper adverts).
• Nature of the product. This may mean that there are legal constraints in particular countries (e.g.
tobacco advertising).
• The other elements of the marketing mix. If the product uses premium pricing, this will influence
the choice of advertising (e.g. premium perfumes might be advertised in glossy magazines).
• Evaluation could include an assessment of which factor is likely to be most important in the
different countries’ markets that the multinational sells to.
Activity 20.3
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Learners’ answers might include:
• Limited budgets. Shop managers are faced with a choice between a wide range of sales promotion
techniques. It is important that limited budgets are spent in the most effective way possible.
• There is little point in spending money on a sales promotion technique if it does not deliver the desired
benefits. It is essential that marketing objectives are met by the chosen form of sales promotion.
• Different techniques offer different potential benefits. For example, in-store displays were felt
to encourage consumers to try a product for the first time whereas loyalty cards encouraged
consumers to purchase from just one store. Therefore, shop managers need to compare cost and
effectiveness in achieving their particular goals.
• Sales promotions cost money and the expenditure may need to be justified in terms of the
outcomes they achieve. Shops aim to make a profit, so budgets need to be justified.
Learners’ answers will vary but should try to evaluate options in terms of cost to the supermarket
against the achievement of the objective set. Two potentially relevant techniques:
Buy one, get one free (BOGOF):
• This encourages multiple purchases.
• The major disadvantage of BOGOF offers is the impact on gross profit margins. It will cause a
substantial reduction in gross profit.
• Current sales are likely to increase substantially and revenue in the short term will be higher.
However, future sales are likely to be lower as consumers have stockpiled the cereal. As cereals
have a relatively long shelf life, there is little danger of the cereal passing its best-before date, so
consumers are unlikely to over-purchase the product.
• As the cereals are highly profitable, BOGOF may be justified as a strategy because profit can still
be made. The offers may draw customers into the supermarket and lead to an increase in spending
on other products.
Cambridge International AS & A Level Business – Stimpson & Farquharson © Cambridge University Press 2021
CAMBRIDGE INTERNATIONAL AS & A LEVEL BUSINESS: TEACHER’S RESOURCE
Price promotions:
• The supermarket offers a temporary reduction in the price of the cereal.
• The price discount will encourage existing consumers to buy more of the cereal and new customers
to purchase it, as it now appears more competitively priced. New customers may continue to
purchase the product in the long term even after the discount is removed.
• Existing consumers will bring forward their purchase of the product. After the discount, sales may
be lower as customers have stocked up on the product.
• A price discount will reduce the gross profit margin on each box of cereal sold.
Activity 20.4
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To support the brand image. For Zao Makeup, the packaging must have a low environmental impact
so uses bamboo rather than plastic.
To protect the product. Consumers may use the product over an extended period and therefore it is
essential that the packaging prevents any deterioration in the contents.
Benefits:
• This is an example of the growing influence of corporate social responsibility. Increasingly,
consumers are concerned about the impact of products on the environment. Therefore, a business
can gain a competitive advantage by using recyclable packaging.
• This improves the marketing of the product to the consumer.
• Higher pricing may be possible.
Disadvantages:
• Recyclable packaging may be more expensive and therefore increases price to the customer.
• It may not be as effective at protecting the product. Plastics are particularly effective for storing
and protecting food products.
• Recyclable packaging is not necessarily more energy efficient and therefore can be more harmful to
the environment.
Evaluation could include: As with so many CSR-based decisions, the increase in costs may be largely
short term but the potential marketing and reputation benefits could be long term. Much will depend
on the cost of using recyclable materials and consumer expectations regarding the product.
Activity 20.5
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Social media was able to reach a large potential audience, resulting in more than 166 million social
impressions. The campaign was relatively cheap as it only required selected music fans to be given
wi-fi-enabled cameras. It fits in well with Nikon’s target market, which is technologically aware.
Arguments for importance: this strategy matches the objective to make the Nikon brand appear more
accessible and not just associated with professionals. Supermarkets have a very high footfall. They
provide a convenient location for consumers to purchase.
Arguments against importance: it may appear to cheapen the brand image away from being a specialist
product. Supermarket employees are unlikely to be knowledgeable about the product, which is
important when choosing a camera.
Evaluation: it depends on the target market, price range and desired image.
Learners’ own answers.
Activity 20.6
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Mix A: advertised on radio only. Radio may be poor at conveying the qualities of a sports car.
Mix B: sold only over the internet. Low-income families are less likely to have access to the internet or
credit cards.
Mix C: low price. This is a fashionable hairdressing salon in a wealthy part of the city and the rest of
the mix supports high prices.
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CAMBRIDGE INTERNATIONAL AS & A LEVEL BUSINESS: TEACHER’S RESOURCE
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Mix D: product. A fast-food restaurant is less likely to support the other elements of the mix, such as a
skimming price strategy.
Mix A: an expensive sports car should be advertised in business magazines as these will be read by
individuals with higher incomes.
Mix B: a range of furniture for low-income families should be sold through discount furniture retailers.
These retailers will attract low-income families.
Mix C: a hairdressing salon using well-known stylists should charge high prices and offer no discounts,
to convey a message of exclusivity.
Mix D: a fine-dining restaurant serving locally produced seasonal food would be more likely to attract
the target market of business executives.
Activity 20.7
Learners’ own answers.
Exam-style questions
Short answer questions
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Advertising is paid-for communication, with potential and existing customers, to inform and/or
persuade. Sales promotions are in-house incentives to generate increased sales, e.g. BOGOF.
Learners’ answers will vary, e.g. to promote a new offer on the existing product; to reinforce brand
image, which helps maintain customer loyalty; to persuade new customers to purchase.
Learners’ answers will vary, e.g. compare sales before and after the promotion, if there are no other major
changes, e.g. competitors increase promotion; survey customers to get feedback on the promotion.
Learners’ answers will vary, e.g. a poorly designed advert results in a negative impact on the brand
image; too-frequent advertising creates annoyance amongst customers.
Branding can increase the perceived value of a product in the minds of consumers. It can make it a
‘must have’ product. This helps to reduce the responsiveness of demand to higher prices as customers
are willing to pay more.
Learners’ answers will vary, e.g. using consumer awareness data to identify consumer recall and awareness
of promotions; using consumer panels to get qualitative feedback on the impact of promotions.
Learners’ answers will vary, e.g. personal selling uses a salesperson to sell to individual customers;
direct mail is sent by post to customers and potential customers.
Learners’ answers will vary, e.g. to regenerate interest in a product which has been on the market for a
long time; to persuade consumers towards alternative uses, e.g. eating breakfast cereal as a snack when
watching TV.
They are small and relatively inexpensive promotions in stores that often result in increased impulse
purchases, e.g. sweets.
Learners’ answers will vary, e.g. it attracts customer attention by its design and colour; it helps a
product stand out from competitors; it provides valuable information, e.g. ingredients of a food
product or allergy information.
Public relations in the form of deliberate use of free publicity provided by newspapers, TV and other
media communicates with the public and promotes a positive image.
Learners’ answers will vary, e.g. online advertising using pop-up banners or placing advertising on other
websites; email marketing to communicate with customers (e.g. notifications about new products).
Learners’ answers will vary, e.g. to break down bulk; allow smaller retailers to enjoy some economies
of scale.
Learners’ answers will vary, e.g. logistical difficulties regarding secure payment systems, cost and
administration of deliveries and returns of unwanted/faulty products; difficulty of getting noticed,
unlike with fashion in a physical market.
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CAMBRIDGE INTERNATIONAL AS & A LEVEL BUSINESS: TEACHER’S RESOURCE
15 Brand image could be improved by the business taking socially responsible decisions such as using
recyclable packaging for cosmetics or a car manufacturer making only electric vehicles. Many
consumers will have a higher rated opinion of the brand.
16 Learners’ answers will vary, e.g. place – virtual market with downloads; price – priced per track
to download.
17 Learners’ answers will vary:
Physical market, e.g. retailer (bike shop). Advantages to business: personal touch; able to persuade
customer; sell additional items. Advantages to customer: customer service; advice; can physically see,
touch and try bikes.
Virtual market, direct from the manufacturer. Advantages to business: lower overhead costs; reaches a
potentially larger target market. Advantages to customer: fewer intermediary mark-ups; might be able
to mix and match or tailor-make more easily; convenient: constantly available; delivery available.
18 It might use point-of-sale displays in retail stores to ensure that shoes are seen by customers.
19 Digital distribution is distribution to consumers by a digital means, e.g. streaming and downloading of
content. Physical distribution moves the physical product to the consumer directly or through channel
intermediaries such as retailers.
20 Learners’ answers will vary, e.g. the cost is lower so the business can save money on promotion; it may
be more suitable due to the target market for the product, e.g. younger consumers.
Essay questions
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a
Advertising is above-the-line promotion and makes use of media to communicate the promotional
message. The media used for advertising include television, cinema and newspapers.
Advertising can be categorised as being either informative or persuasive:
• Persuasive advertising tries to create a distinct image for the product and contains little or no
information about the physical aspects of the product.
• Informative advertising provides information about the product. Adverts for computers often
focus on technical details such as memory size and processor speed.
Direct promotion is a form of below-the-line promotion so does not use a paid-for medium.
Methods include direct mail, telemarketing and personal selling. Personal selling is often used for
industrial products so is a key feature of business marketing.
b There are a number of techniques that can be used to determine whether promotion campaigns
have been successful including:
• Analysing sales before, during and after the campaign. However, an increase in sales does
not mean that the campaign has been successful. There are many other influences on demand
including the marketing decisions of competitors.
• Market research. Firms can use consumer panels to monitor the views of a small group of
consumers over time. This will enable changes in consumer opinion to be identified.
• Response rates to advertisements:
• Money-off coupons in magazines and newspapers can be tracked to identify the take-up
on a particular offer. This provides a direct measurement of the impact of the promotion.
However, it doesn’t identify whether those consumers using the voucher would have
purchased the product anyway.
• Websites can record the number of ‘hits’ received (i.e. how often an advert has been
viewed). However, just because an advert has been viewed, does not mean that it will lead
to a purchase.
• Consumer awareness data. This is published by market research agencies based on consumer
recall tests of advertisements. This gives good feedback on whether the advert has been seen
and remembered.
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CAMBRIDGE INTERNATIONAL AS & A LEVEL BUSINESS: TEACHER’S RESOURCE
Evaluation: despite these techniques, it remains difficult to quantify the success of promotion due to the
large number of external factors including changes in the economic environment; changes in consumer
tastes; promotional activity of competitors; changes to the price and product of competitors.
The success of promotion cannot always be judged on the basis of short-term sales; promotion
may have much longer-term benefits for the business.
2 a Learners’ answers will vary but should include two of: e-commerce is increasingly popular,
especially with younger target markets, e.g. the success of ASOS or a similar online retailer; it
reaches a wider audience, e.g. opportunity for worldwide sales; customers can shop at any time,
which increases convenience, plus they can use stores for click and collect or returns.
b Arguments for: it creates brand awareness and brand image, which is important when spending
on expensive goods such as a car. Image is important when choosing a car because it gives an
indication of personality and lifestyle.
Arguments against: the product is important as the consumer will want specific features and
functions as well as assurance about quality and safety. Price is important as it is a highly
competitive market with many makes and models of car to choose from.
Evaluation: it depends on the main influences on customer behaviour, e.g. whether they are more
price- or image-sensitive.
3 a Learners’ answers will vary but should include examples and analysis relating to two of the
following points. Packaging supports promotion of a product by:
• providing information on the product to consumers
• reinforcing the branding through the design and colour of the packaging
• attracting the attention of consumers through use of colour and materials
• protecting the product from damage
• helping to give the product a USP
• enhancing the environmental credentials by using recyclable packaging.
b Learners’ own answers but must be clearly based on a business (or industry) and should include
both the benefits and limitations of digital marketing. Both promotion and place should be
considered in the evaluation.
Data response questions
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Penang Golf Kit (PGK)
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It informs customers.
The name given to a product or range of products by a business.
($5/$45m) × 100 = 11.1%
It may not be very well targeted at golf players even if undertaken during sports events, so it
may be less effective than, for example, direct marketing to members of golf clubs.
Learners’ answers will vary, e.g. it is a low-cost method of targeting the market with relatively low
fixed costs; PGK wishes to target young golf players and they are more likely to use e-commerce
than PGK’s traditional customers; e-commerce is an effective way of reaching a worldwide
audience, allowing PGK to increase global sales; PGK can easily measure effectiveness as the
number of clicks or visitors can be recorded for different web-based promotions; e-commerce is
convenient for consumers to use, so should increase sales.
National golfing magazine:
• The 12 adverts would cost $496 000, including the preparation of the advert.
• This would reach 250 000 readers so the cost is about $2 per reader.
• This option has the advantage of being more specifically targeted at golfers. Readers are likely
to be interested in the adverts for equipment and clothing, and less likely to ignore the advert.
• However, as the age profile of the readership is not known, this might not be effective at
reaching the target market.
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CAMBRIDGE INTERNATIONAL AS & A LEVEL BUSINESS: TEACHER’S RESOURCE
TV advertising:
• This would use up virtually the whole budget as 20 adverts cost $0.5m and the production
costs are $0.4m. However, once produced the advert could be re-used at a later date.
• Coverage during the Saturday football match of the under-21 age group is 1.25m and for the
Friday evening slot it is 1.5m.
• Viewers are likely to be sports fans but football may appeal to a slightly different demographic
than golf.
• TV offers the benefit of moving images and sound. This can make the message more effective,
particularly as it is sports-related.
• Channel-hopping reduces the impact of TV adverts as viewers switch channels.
Sponsorship:
• Tim Lui is popular with young golfers so this could be effective at attracting the target
audience to purchase equipment and clothing.
• It would use 30% of the budget so leaves money for other forms of promotion.
Digital promotion:
• Minimum cost is $250 000 plus the average $7 pay-per-click fee. It would be easy to measure
effectiveness and use of Twitter and Facebook could target younger golfers effectively.
Evaluation will need to balance the cost, coverage of the target audience and likely impact of each
form of advertising. The budget is limited and for coverage of the target market it would appear
that a combination of digital promotion, sponsorship and some magazine advertising might be
possible. This uses more than one form of promotion and could therefore be more effective.
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Apple
a i
Potential consumers will be aware of the product’s image.
ii
Range of selling and marketing activities that use the internet.
b Customers can see product demonstrated. The retailer will offer after-sales service to consumers.
c Learners’ answers will vary, e.g. e-commerce has global reach and low fixed costs, so offers greater
cost-effective coverage of the global market. It may be more effective for reaching the new target
market.
Selling through retailers enables customers to see and touch the products. Some customers may be
unwilling to purchase without having the product demonstrated.
d Advantages of Apple owning its own retail stores:
• Retail outlets can focus on Apple products alone.
• Apple has more control over the way its products are sold, e.g. positioning of in-store displays
and the design and layout of the retail stores. This provides a good brand-building platform
for Apple.
• Apple is able to ensure that staff are trained to demonstrate products and give consumer
advice. The ‘Apple Retail Store Experience’ gives consumers the chance to try out all products.
Apple is able to offer highly trained staff to deal with technical questions. This enhances
customer service and offers significant added value to the business.
• Apple can absorb the profit margin that would normally go to the retailer.
• Retailing its own products can be used as leverage in negotiations with other retail partners as
Apple is less dependent on them.
• Apple gains access to consumer data.
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CAMBRIDGE INTERNATIONAL AS & A LEVEL BUSINESS: TEACHER’S RESOURCE
Disadvantages of Apple owning its own stores:
• The company has limited direct retail experience. Apple will have to recruit and train staff for
the retail outlets. Apple’s expertise is in innovating products and manufacture, not retail.
• Companies selling Apple products will face direct competition from Apple stores. The article
refers to the danger of Apple coming into conflict with retail partners such as CompUSA.
• The cost of acquiring suitable retail outlets and refurbishing them to Apple’s design standards.
The store will have to look innovative to match the image of the business.
• High fixed costs of running the stores.
An overall conclusion/judgement is needed as evaluation, based on learners’ balancing of the
arguments given. For example, is it more important to offer technical experts giving pre- and aftersales service face-to-face or is it better to sell Apple products at lower prices?
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